If we know anything about investing, we should know the media is the worst place for a source of relevant information. We can assume that the real importance of anything the media reports on is inversely proportional to the intensity of reporting. Nick Murray points this out in the attached article regarding the media reporting on the Ebola scare of 2014/2015. As proven by the Visual Capitalist – “How the Media Blows things Out of Proportion” the Ebola story was off the historical charts. This story got more space than any previous “global scare” yet. There has been exactly 1 death in North America attributed to Ebola during that time.
I regularly read a lot of different views on the market to try to get a combined perspective. Predicting short term market movements are difficult and very risky – especially if we change our long term strategy based on a short term outlook. However I found Jim Paulsen’s (Chief Investment Strategist Wells Capital Management in the US) recent analysis interesting.
Paulsen feels the US S&P 500 will trade between about 1800 and 2200 and likely end the year flat. But there are four positive forces that could increase investor optimism and provide a boost to equity markets:
1 – Since commodity prices are showing signs of increasing, thoughts of deflation are subsiding.
2 – Corporate profits will likely be better than thought in the latter half of this year.
3 – Global economies appear to be heading towards a synchronized economic recovery.
4 – Also, fear has returned among investors – typically a good sign that the market is about to turn
For all the details from Jim’s outlook: May-2016 Jim Paulsen Outlook.
Here is the difficult truth – if you are going to survive as an equity investor you need to accept that your portfolio will be in a decline state about 50% of the time! But that’s okay because the declines are temporary and the recoveries inevitable.
180 Years of Market Drawdowns